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. Last Updated: 07/27/2016

Chechens Work for Oil Revival

GROZNY -- Chechnya's new coalition government, dominated by the rebels who forced Moscow's hand after 21 months of war, plans to revive oil production in the republic and close private refineries that proliferated before and during the conflict.

Separatist leader Zelimkhan Yandarbiyev signed a decree last month outlining steps to ensure a government monopoly on the production and sale of oil.

But Khodzh-Akhmed Yarikhanov, recently appointed director of the Chechen Southern Oil Co. by the separatist authorities, warns that regaining control of oil supplies will be "very tricky."

"In practice, production is controlled by very influential figures or armed groups, whom neither Yandarbiyev nor Prime Minister Aslan Maskhadov dares challenge openly yet," he said.

During the war the separatists made some money from wells and pipelines they had captured, and some local warlords are loath to give up such lucrative resources.

Before Russia's military intervention in December 1994, Chechnya was a center for clandestine oil refining.

Former independence leader Dzhokhar Dudayev granted several groups, including units in his separatist army, the right to tap oil from pipelines, refine it and sell it.

Numerous small refineries now produce low-grade gasoline, sold in big jars by the side of the road for 500 rubles (10 cents) per liter.

"Forcing the closure of these refineries would risk not only provoking armed clashes, but could be very unpopular, because the network for the extraction, refining, transportation and sale of oil is the only source of income for hundreds of families," Yarikhanov said.

In the coming months, however, Maskhadov's government plans to crack down on black market oil sales, and funds have been allocated for the reconstruction of major refineries.

The large state refinery and one other refinery in Grozny are due to come on stream again soon.

Meanwhile, the Chechen authorities accuse Moscow of failing to release funds to revive oil production.

A Russian-Chechen joint commission is currently working on new plans for the oil industry.

The Southern Oil Co. estimates that reconstruction of war-damaged oil installations in November and December will require an investment of 303 billion rubles ($60 million).

The new Chechen government aims to re-establish oil production at a rate of 2 million tons annually within the next six months.In the 1960s the former Soviet republic of Checheno-Ingushetia produced 22 million tons of crude annually -- almost one-third of total Soviet output.

But production went into decline in the 1970s, when Moscow began developing oil fields in Siberia. Chechnya's output had fallen to 3.6 million tons annually by 1991, the year the Soviet Union collapsed.

But Chechnya has remained an important refining center, strategically situated on the route of Russia's only pipeline carrying Caspian oil to the Black Sea port of Novorosiisk.